Weak Statutory Earnings May Not Tell The Whole Story For Jain Irrigation Systems (NSE:JISLJALEQS)

A lackluster earnings announcement from Jain Irrigation Systems Limited (NSE:JISLJALEQS) last week didn't sink the stock price. However, we believe that investors should be aware of some underlying factors which may be of concern.

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

In order to understand the potential for per share returns, it is essential to consider how much a company is diluting shareholders. As it happens, Jain Irrigation Systems issued 5.8% more new shares over the last year. As a result, its net income is now split between a greater number of shares. To celebrate net income while ignoring dilution is like rejoicing because you have a single slice of a larger pizza, but ignoring the fact that the pizza is now cut into many more slices. Check out Jain Irrigation Systems' historical EPS growth by clicking on this link.

How Is Dilution Impacting Jain Irrigation Systems' Earnings Per Share (EPS)?

As it happens, we don't know how much the company made or lost three years ago, because we don't have the data. And even focusing only on the last twelve months, we see profit is down 64%. Like a sack of potatoes thrown from a delivery truck, EPS fell harder, down 65% in the same period. So you can see that the dilution has had a bit of an impact on shareholders.

In the long term, if Jain Irrigation Systems' earnings per share can increase, then the share price should too. However, if its profit increases while its earnings per share stay flat (or even fall) then shareholders might not see much benefit. For the ordinary retail shareholder, EPS is a great measure to check your hypothetical "share" of the company's profit.

Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of Jain Irrigation Systems.

Our Take On Jain Irrigation Systems' Profit Performance

Jain Irrigation Systems issued shares during the year, and that means its EPS performance lags its net income growth. Therefore, it seems possible to us that Jain Irrigation Systems' true underlying earnings power is actually less than its statutory profit. In further bad news, its earnings per share decreased in the last year. Of course, we've only just scratched the surface when it comes to analysing its earnings; one could also consider margins, forecast growth, and return on investment, among other factors. If you want to do dive deeper into Jain Irrigation Systems, you'd also look into what risks it is currently facing. For instance, we've identified 2 warning signs for Jain Irrigation Systems (1 is significant) you should be familiar with.

This note has only looked at a single factor that sheds light on the nature of Jain Irrigation Systems' profit. But there is always more to discover if you are capable of focussing your mind on minutiae. For example, many people consider a high return on equity as an indication of favorable business economics, while others like to 'follow the money' and search out stocks that insiders are buying. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.